MAXIMUM LIKELIHOOD ESTIMATION AND INFERENCE ON COINTEGRATION — WITH APPLICATIONS TO THE DEMAND FOR MONEY

MAXIMUM LIKELIHOOD ESTIMATION AND INFERENCE ON COINTEGRATION — WITH APPLICATIONS TO THE DEMAND... I. INTRODUCTION 1.1. Background Many papers have over the last few years been devoted to the estimation and testing of long-run relations under the heading of cointegration, Granger (1981), Granger and Weiss (1983), Engle and Granger (1987), Stock (1987), Phillips and Ouliaris (1986), (1987), Johansen (1988b), (1989), Johansen and Juselius (1988), canonical analysis, Box and Tiao (1981), Velu, Wiehern and Reinsel (1987), Pena and Box (1987), reduced rank regression, Velu, Remsel and Wiehern (1986), and Ahn and Reinsel (1987), common trends, Stock and Watson (1987), regression with integrated regressors, Phillips (1987), Phillips and Park (1986a), (1988b), (1989), as well as under the heading testing for unit roots, see for instance Sims, Stock, and Watson (1986). There is a special issue of this BULLETIN (1986) dealing mainly with cointegration and a special issue of the Journal of Economic Dynamics and Control (1988) dealing with the same problems. We start with a vector autoregressive model (cf. (1.1) below) and formulate the hypothesis of cointegration as the hypothesis of reduced rank of the longrun impact matrix H = aß'. The main purpose of this paper is to demonstrate the method of maximum likelihood in connection with two examples. The results concern http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Oxford Bulletin of Economics & Statistics Wiley

MAXIMUM LIKELIHOOD ESTIMATION AND INFERENCE ON COINTEGRATION — WITH APPLICATIONS TO THE DEMAND FOR MONEY

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Publisher
Wiley Subscription Services, Inc., A Wiley Company
Copyright
© 1990 Blackwell Publishing Ltd
ISSN
0305-9049
eISSN
1468-0084
D.O.I.
10.1111/j.1468-0084.1990.mp52002003.x
Publisher site
See Article on Publisher Site

Abstract

I. INTRODUCTION 1.1. Background Many papers have over the last few years been devoted to the estimation and testing of long-run relations under the heading of cointegration, Granger (1981), Granger and Weiss (1983), Engle and Granger (1987), Stock (1987), Phillips and Ouliaris (1986), (1987), Johansen (1988b), (1989), Johansen and Juselius (1988), canonical analysis, Box and Tiao (1981), Velu, Wiehern and Reinsel (1987), Pena and Box (1987), reduced rank regression, Velu, Remsel and Wiehern (1986), and Ahn and Reinsel (1987), common trends, Stock and Watson (1987), regression with integrated regressors, Phillips (1987), Phillips and Park (1986a), (1988b), (1989), as well as under the heading testing for unit roots, see for instance Sims, Stock, and Watson (1986). There is a special issue of this BULLETIN (1986) dealing mainly with cointegration and a special issue of the Journal of Economic Dynamics and Control (1988) dealing with the same problems. We start with a vector autoregressive model (cf. (1.1) below) and formulate the hypothesis of cointegration as the hypothesis of reduced rank of the longrun impact matrix H = aß'. The main purpose of this paper is to demonstrate the method of maximum likelihood in connection with two examples. The results concern

Journal

Oxford Bulletin of Economics & StatisticsWiley

Published: May 1, 1990

References

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